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Pressure mounts on India over EU sugar quotas

Ranvir Nayar in Brussels

Pressure is mounting on India to initiate discussions with other sugar producing developing countries to settle a dispute over quotas for sugar exports to the European Union.

India is seeking an increase in its current quota of sugar exports to the EU. And with the EU launching a new regime covering the production and import of sugar, India hopes the former will release an additional quota for its produce.

Currently, India has a quota to export 20,000 tonnes of sugar each year to the EU. Of this 10,000 tonnes is exported under a preferential import agreement with the EU. This agreement guarantees exporters a price of 52.37 euros per 100 kilos, the same as the market intervention price in the EU or the price that the European farmers get for their sugar produce.

Another 10,000 tonnes is exported by India under the SPS (Special and Preferential Sugar) Agreement of 1995. This sugar is exported at 85 per cent price of the preferential import or 44.52 euros per 100 kilos.

The EU, however, says though it has accepted the argument for continuing with the SPS in the new regime, there will be a decrease in the total amount of raw sugar imports from India and the developing countries of the Africa, Caribbean and the Pacific.

The ACP countries represent some of the poorest countries in the region, which have been formerly colonies of European nations. These countries have a guaranteed quota of 1.5 million tonnes in the EU market.

To add to it, the EU has also guaranteed duty free imports from the least developed countries under its 'Everything But Arms' initiative. This could also lead to significant sugar exports from countries like Bangladesh.

The EU currently produces 16 million tonnes of sugar and consumes only 13 million tonnes, leaving a surplus of over three million tonnes each year.

The EU is obliged to buy all of its domestic sugar produce at 52.37 euros per 100 kilos, more than double the market price, putting a huge strain on its agriculture support budget.

This strain is one of the main reasons behind the EU going in for a new regime, which is aimed at reducing the burden on taxpayers.

Citing these factors, EU officials say they are not in a position to increase the quota for India or any other player at all.

"We have the mandate to negotiate and the total amount of raw sugar imports from India and the ACP will indeed decrease," says a senior official of the European Commission.

India is seeking an increase of 5,000 tonnes in its quota. "We will certainly be very sympathetic to India's demand for an increase in the quota, but it will be very difficult for us to increase India's quota, while slashing ACP's quotas," the official said.

Incidentally, amongst the ACP countries the biggest losers could be two countries with a high population of ethnic Indians -- Fiji and Mauritius.

The European Commission official said India should begin talking with Mauritius, which has currently an export quota of 400,000 tonnes to the EU.

"If Mauritius can reach an agreement with India, it can sell it to other ACP countries," says the official.

Indo-Asian News Service

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